Crisis deepens at Aston Martin as profit shows steep decline

The crisis at Aston Martin deepened after the UK carmaker reported a steep profit decline in its first full year as a listed company, hammering its stock and bonds and increasing the urgency to attract fresh capital for a turnaround.

Adjusted earnings for Aston Martin Lagonda Global Holdings were about £130 million to £140 million (€153-€164 million) last year, compared with the £247 million reported for 2018, the company said. Its shares fell as much as 16 per cent to 436 pence, bringing the decline since the initial public offering in late 2018 to about 75 per cent.

Aston has turned out to be a deeply unprofitable investment for shareholders, ending the year as the the second-worst performing stock on the FTSE 350 index. Ferrari's stock, by contrast, returned 70 per cent last year, highlighting the diverging fortunes between the two supercar brands in a year that Aston Martin chief executive Andy Palmer called "very disappointing".

"It's extraordinary to see how much the Aston Martin equity story has unravelled since the IPO," Max Warburton, an analyst at Sanford C Bernstein in London, wrote in a note. Mr Warburton said the need to raise capital is "long overdue" and that partnering with another manufacturer is "probably desirable".

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“Whether such a partner is available and whether there will be substantial equity value upside from a deal remains unclear,” he wrote in the note.

Speaking in an interview, Mr Palmer sought to focus on what he called the “one bright spot” at Aston: the order book for the new DBX SUV that has turned into a make-or-break product for the company. The company has been battered by an industry downturn, uncertainty around Brexit and a lukewarm response to some models. Weaker-than-expected sales have forced the carmaker to scale back its sales volume targets. While Aston Martin made progress reducing inventory, it remains “a bit higher than we’d like”, Mr Palmer said in an interview.

"The main question is not how many DBX have been ordered, but at what price and will it generate free cash or enough money to offset falling sales of Vantage/DB11," said Sanjay Jha, an analyst at Panmure Gordon in an email.

The carmaker said it remains in talks with potential investors that were originally announced in December. That month, industry magazine Autocar reported that Canadian fashion billionaire Lawrence Stroll is planning a bid for the company. – Bloomberg